Mukti

Ramadanomics

Posted in economics, labour, macro, society by jrahman on June 19, 2016

Ramadan fasting is like no other Islamic ritual.  In the month of Ramadan, those who never perform the pre-dawn Fajr prayer get up even earlier to eat, only to abstain until dusk.  And after a month of that, even those who would otherwise never set foot in a mosque line up in unison to kneel towards Mecca.   For an entire month, from cooking, attire, TV to intimacy — the very lifestyle of a billion plus people change.  Except perhaps the aversion to pork, observance of, or at least respect to, the Ramadan fasting is arguably the most ubiquitous characteristic of Muslims.

Given its prevalence and ubiquity, Ramadan must have observable economic impacts.  Exactly what might they be?  In a fascinating paper, Filipe Campanile and David Yanagizawa-Drott of Harvard’s Kennedy School provide us with some answers.*  Summary — fasting makes us happier, if poorer.

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Khichuri index

Posted in economics, labour, macro by jrahman on December 24, 2015

A staple of political rhetoric in Bangladesh is to ensure affordability of rice, lentil, oil and salt.  Throw in a kilogram of coarse rice, 250 grams of red lentil, 40 ml soya bean oil and 10 mg salt and we get a rather bland plate of khichuri.  CEIC Asia database provides monthly retail prices of these essentials in Dhaka with a lag.  Currently, the latest data point is August 2014.  Still, using the bland recipe and prices (and smoothing the data by taking a 12-month moving average), we can get a sense of how the price of our plate of khichuri has evolved over time — for example, when BNP was turfed out in January 2007, such a plate cost around 35 taka, which rose to around 60 taka when the Awami League returned to power in January 2009, and was around 70 taka when its five year term expired.

Of course, to say anything sensible about prices, we need to have a sense of income.  From the same source, we can get daily wage of a skilled factory worker.  Her wages went from around130 taka a day in January 2007 to over 210 taka two years later to over 300 taka further five years on.

Putting the two together, we can get what I am going to call the Khichuri Index — plates of khichuri an average industrial worker can buy in Dhaka.  The chart below shows how the index has evolved between January 2000 and August 2014 (the period I have data for).

khichuri

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Surviving the white crow

Posted in Bangladesh, democracy, economics, governance, macro, political economy, politics by jrahman on January 20, 2015

Nassim Nicholas Taleb popularised the term ‘black swan’ in his 2007 book.  It comes from the Latin expression rara avis in terris nigroque simillima cygno, meaning “a rare bird in the lands, very much like a black swan” — they didn’t have any black swan in Europe, and thought swans must be white.  That notion changed when the Europeans came to Australia.  Taleb pithily summarises his thesis as:

What we call here a Black Swan (and capitalize it) is an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme ‘impact’. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.

In Bangladesh, perhaps we could think about ‘white crow’ events — our crows are black, we think crows must be black, but of course there are white crows Down Under.

Taleb’s work gained much popular acclaim after the 2008-09 financial crisis.  The thing about black swans / white crows, however, is that they are hard to predict ex ante.  That’s Taleb’s first attribute.  As such, for analysts and policymakers, it might seem that Taleb has little of practical value to offer.

His subsequent work seeks to address this concern.  In a widely read Foreign Affairs article*, Taleb and a co-author argues:

Thus, instead of trying in vain to predict such “Black Swan” events, it’s much more fruitful to focus on how systems can handle disorder—in other words, to study how fragile they are. Although one cannot predict what events will befall a country, one can predict how events will affect a country. Some political systems can sustain an extraordinary amount of stress, while others fall apart at the onset of the slightest trouble. The good news is that it’s possible to tell which are which by relying on the theory of fragility.

…..

For countries, fragility has five principal sources: a centralized governing system, an undiversified economy, excessive debt and leverage, a lack of political variability, and no history of surviving past shocks.

How does Bangladesh look through the prism of Taleb’s theory?  I’d argue we should be at least concerned about the possibility of things falling apart, though there are also things to be hopeful about.

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Books

Some time ago, there was a facebook meme about 10 books:

List 10 books that have stayed with you in some way. Don’t take more than a few minutes and do not think too hard. They do not have to be the great works of literature, just the ones that have affected you in some way. Tag 10 friends and me so I can see your list.

Over the fold, for archival purposes, are two lists — one general, the other economics related.

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Ideas that went nowhere…..

Posted in development, economics, labour, macro, micro, political economy by jrahman on January 12, 2015

….. because life got in the way.

Okay, that’s a bit melodramatic.  Let’s start again.  It used to be the case that to have a professional career as an economist in America, you needed a PhD.  That’s changing a lot.  There’s a general glut of PhDs.  And organisations such as the IMF are now more interested in people with practical experiences than half a decade or more of often impractical academic training.  In any case, outside America, PhDs were always for those who wanted to pursue an academic career.  So, other than the vanity of being addressed as Dr Rahman, I’ve never really seen much return from doing a PhD.

And yet, every now and then, I think about the ideas over the fold and wonder what might have been.

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The real record — inflation (continued)

Posted in economics, macro, political economy, Uncategorized by jrahman on December 24, 2013

For those coming in late, even though inflation has risen under the current government (Chart 1), real GDP per capita has grown by around 4½ per cent a year under successive governments over the past decade.

c1 (2)

Over the last couple of weeks, I have had a bit of correspondence about inflation. This post answers some of the questions.

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Decoding The Bangladesh Paradox — A Research Agenda

Posted in development, economic history, economics, institutions, labour, macro, political economy, trade by jrahman on December 2, 2013

The macroeconomic fact is, in the last decade, under all three governments, per capita GDP have grown by around 4½ per cent a year. At that rate, average real (that is, inflation-adjusted) income doubles in 16 years. …. This is impressive stuff, for which every recent government deserves some credit.

That’s the conclusion from the post on real GDP per capita growth under different governments. Of course, real GDP per capita is a means to the end, not the end in itself. What we really care more about is the standard of living that higher real GDP per capita entails —that is, it’s the development record, and not just the growth, under different governments that we want to know.

This, however, raises two questions. First, how do we attribute to any particular government the growth and development record when policies under any particular government are likely to have long term consequences? And second, how do we explain the Bangladesh Paradox:

The belief that growth brings development with it—the “Washington consensus”—is often criticised on the basis that some countries have had good growth but little poverty reduction. Bangladesh embodies the inverse of that: it has had disproportionate poverty reduction for its amount of growth.

That quote is from a November 2012 Economist article. That article, and accompanying editorial, had a go at explaining the paradox. Joseph Allchin had a crack more recently at the NY Times. The suspects are usual: garments, remittance, NGOs. But we economists are a parsimonious lot, or so we like to think. We would like to know exactly what contribution each of these factors made, what was the channel through which the factors affected growth and development, what role, if any, did government policy play, and what all that means for future.

I haven’t seen a comprehensive analysis of the Bangladesh Paradox. And no, I am not going to provide the answer in this post. Rather, over the fold is a research agenda on how to analyse the Paradox.

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The real record — inflation

Posted in economics, macro by jrahman on November 8, 2013

In the previous post in this series comparing various governments’ economic and development records, we saw that when it comes to growth in average income, there hasn’t been much difference between the three latest governments. The increase in average income in that post is real, that is, after allowing for inflation. However, inflation is an important economic indicator in its own right.

In fact, as far as average person is concerned, real GDP per capita is an abstract construct, whereas prices of everyday commodities is, for the lack of a better word, much more real! Arguably, more than the war crimes trial or Digital Bangladesh, it was the promise in the video below that brought Awami League its 2008 landslide. And arguably, more than India or Islam factors, it’s the failure to meet this promise that’s behind AL’s sagging popularity.

Politics in Bangladesh, as the saying goes, is price of rice.

This post looks at the recent governments’ record when it comes to inflation.  However, we need to begin with a bit of wonkery because when evaluating different governments on inflation, we need to keep some basic economics in mind, some of which may be counter intuitive

Once we go beyond the wonkery, three charts will show that the current government performs poorly compared with the last BNP government as far as inflation is concerned.

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The real record —real GDP per capita

Posted in development, economic history, economics, macro by jrahman on November 2, 2013

In a previous post, I showed how the AL claim/promise of ‘doubling per capita income’ is problematic. That post foreshadowed a series comparing macroeconomic and development performances under successive governments — a more detailed and updated version of this exercise. This is the first part of that series, focussing on real GDP per capita — an oft-used proxy for economic and social welfare of a country.

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Harvard education, তথ্য , and the real record

Posted in development, economic history, economics, macro by jrahman on October 17, 2013

Harvard Kennedy School of Government’s Executive MPA program requires one compulsory course in Economics and Quantitative Analysis.    Reading about his claim and promise about doubling per capita income, I wonder whether Mr Sajeeb Ahmed Wazed — the Prime Minister’s son and an emerging Awami League leader — paid any attention in that course.

According to Channel I and Prothom Alo, Mr Wazed said:

“গত পাঁচ বছরে আপনাদের আয় দ্বিগুণ হয়েছে। আমরা ওয়াদা করছি, আবার ক্ষমতায় গেলে আয় দ্বিগুণ করব….. গড় আয় ৪০ হাজার টাকা থেকে বেড়ে ৮০ হাজার টাকা হয়েছে”

In the past five years, your income has doubled.  We promise that when we return to power, we will double it again… average income has increased from 40,000 taka to 80,000 taka.

The claim / promise has been relayed around the cyberspace, and is a key talking point in the Awami echo chamber.  The thing is, if Mr Wazed had really understood anything in that Kennedy School course, he would not have said the above.  And Awami Leaguers would be well advised to not push this line.

Let’s go through this blow-by-blow.

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